My friend Gillian called the other day — she's been having money trouble and was looking for help. “I'm not really a financial advisor,” I told her. “I write about money, and I try to help people at my web site, but I'm not qualified to coach you one-on-one.” Still, she's a friend, so I resolved to at least give her some advice. I asked her to explain the situation.

“Tom and I are working all the time, but we're always broke. He just wrecked his car, but we don't have money to get it repaired. We'll have to use the credit cards again. We don't have any other choice. There's never anything left at the end of the month,” she said. “I need some help budgeting so that we don't keep having this problem.”

“Well, let's see what we can do. I guess the best place to start is with your monthly income and your monthly expenses. How much do you and Tom bring home each month?” I asked.

“About $4,000 after taxes.” That was about what I expected.

“How much do you spend?” I asked.

“All of it,” she said, laughing. I expected that, too.

“How much do you have saved?” I asked. “Do you have any savings at all?”

“No, we don't,” she said. “There's never been anything left over to save.”

They don't have anything left to save because they're very good at spending money. Gillian and Tom live well:

They have a nice custom-built home.

Each of them drives a late model SUV.

They have no kids.

They enjoy expensive hobbies.

I have friends who make half what Gillian and Tom do, but have built a nest egg because they maintain a frugal lifestyle. It should be easy for these two to reduce their spending to create a budget surplus. “Well, let's see if we can find a way to free up some cash,” I said. “Let's list your fixed monthly expenses.”

Gillian listed their bills one-by-one. I jotted them down, making note of anything that seemed particularly extravagant. “Okay, let's see what we have,” I said. “You're paying a housekeeper $50 a week. If you were to clean the house yourself, you'd save $200 a month.”

“But…” she began.

“I think you'd be surprised at how much difference $200 a month can make,” I said. “I know from experience that even a $50 positive cash flow can make the difference between feeling broke and feeling flush. A $200 difference is huge.”

“Yeah,” said Gillian, “but I don't want to clean the house. It's too much work.” I was puzzled. To me, this was a quick and obvious way to free up money. If I were in her shoes, the housekeeper would be the first thing to go — it would be worth some extra work on my part. I tried a different approach.

“You each have a cell phone,” I said. “Do you both need one?”

“Yes,” said Gillian. “I don't know what I'd do without one. And Tom needs one for work. I need to be able to reach him.”

Her reasoning seemed thin, but I pressed on. “Well, what about the cable bill,” I said. “You're paying $60 a month for that. That's an easy one. What about cutting back to basic cable?”

“Oh, we can't get rid of cable,” Gillian said. “We watch TV all the time.” I was silent. “Are you there?” she asked.

“I'm here,” I said. “I'm just trying to figure out what to do. In order for you to turn things around, you're going to have to make some sacrifices.”

“Yeah,” she said, “but we can't cut cable. Tom would have a fit.”

“Gillian,” I said, “this is a little frustrating. I thought you wanted to get out of your money situation.”

“I do,” she said, “but so far you're just suggesting things for me to get rid of. Isn't there something else we can do? Can't we use a budget to get more money?”

“That's what I'm talking about,” I said. “Cutting things like these is making a budget. I know it seems terrible to have to give things up, but you need to make sacrifices — at least in the short term — in order to get ahead. You don't have any savings. Any disaster means you're putting money on your credit card. You need to build up some savings. You need to pay off your existing debt. In order to do this, you need to spend less than you earn. Right now you're spending exactly what you earn, and you'll never get ahead that way. I know, because for years that's how I operated. You're going to have to tighten the belt, Gillian. It's the only way.”

I paused, and then said, “You need to decide what's important.”

It was obvious I wasn't going to be able to help her. I hadn't even explored the Big Ideas, like moving down to a smaller home or trading one of their SUVs for a used car. I had started with the medium-sized stuff — the obvious chaff. But Gillian wasn't interested in making changes if it meant altering her lifestyle. I changed the subject.

We talked about summer. Gillian asked how our garden was. I described the knee-high corn, the ripe raspberries, and Kris' monster tomatoes. “I'm jealous,” she said. “I don't have time to garden. I did get a chance to go to the nursery last week, though. I was able to pick up five shrubs on sale for about $10 each.”

The shrubs were the final straw. There was nothing I could do to help her because she wasn't ready to be helped. She wasn't ready to listen. She said she wanted to change, but she didn't really. She was looking for a magic pill, something that would make life easier without any effort on her part. That's not how it works. Eventually Gillian will reach a place so bad that she'll begin to see the need to take responsibility for improving her situation, but she's not there yet.

Our conversation reminded me of an episode of This American Life I heard recently. The show profiled debt guru Dave Ramsey, and at one point the reporter played a segment in which Dave experienced similar frustration:

Tina calls Dave because she's upside-down on her car loan. She recently wrecked the car, but rather than use the money to repair the vehicle, she spent it. “Ooooo-kay,” says Dave, obviously flustered. “I'm afraid what you're looking at is probably a really good part-time job, about six or eight months of 80 hour weeks.”

“Eighty hour weeks?” says Tina. “That's too much work.”

“I can't help you, Tina,” says Dave.

And I can't help you, Gillian.

This story is based on actual events. Names and situations have been changed to protect Gillian's identity.

In 2006, J.D. founded Get Rich Slowly to document his quest to get out of debt. Over time, he learned how to save and how to invest. Today, he's managed to reach early retirement! He wants to help you master your money — and your life. No scams. No gimmicks. Just smart money advice to help you reach your goals.

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There are 93 reader responses to "You Are Your Own Worst Enemy".

bornbadsays

This story is why I’m so glad I stumbled across Your Money or Your Life. Your friend is someone who really needs to read that book and start the exercises. I particularly find the step where you list all your monthly expenses (right down to the penny) and decide if you got fullfilment out of it, if it lines up with your values, and if you would spend more or less on it if you didn’t have to work. My wife and I do this step together and it’s amazing the conversations that start up about our money (none of which get heated) because it’s all laid out right there in front of you. All you have to do is decide if the money spent was worth it for you and if you actually got any enjoyment out of it.

But, yeah, if she knows they spend every penny they make and isn’t willing to cut back on anything at all, there’s no way someone can help her.

This article speaks so many truths about a majority of Americans out there. They have no financial education and are unwilling to change their ways. I wrote a post today about your article expressing my own feelings that personal finance classes should be taught in school as a requirement of graduation.

Wonderful. I admire that you tried to help, but you knew when to let it go. I have just been through a similiar situation, so I think I will describe that one in an entry while you are away (gotta fill up this place somehow)

The behavior of Gillian and Tina is awfully similar to that of people suffering with obesity.

With few exceptions, all obese people know they eat too much and they all know they should exercise more. But, they can’t correct their behavior until they truly WANT to fix it. Without a real desire to change their lifestyle, they’ll come up with every manner of excuse to maintain the status quo.

Similarly, Gillian and Tina certainly know enough about finances to know that they’re spending too much money, but they don’t yet have the desire to make the necessary changes in their spending habits.

Sadly, it probably will take a significant event like bankruptcy and/or enormous credit card debt to set them straight.

My husband and I have talked about hiring a cleaning service. Why? Because our house is generally always sorta messy because we are both busy people and don’t have a whole lot of time to clean and because all our friends have cleaning services or people and we make more than them. But we want to be different! We don’t want to be like everyone else – broke. So instead we clean when we can and otherwise it stays messy but we remind ourselves that we are paying ourselves when we clean our house.

I think sometimes its easier to go without if you think of it not as a cut (negative, I’m doing without) but as a bonus (I’m paying myself $400-$500 a month to clean my house, imagine what I can do with that money).

It’s a bit of a draw. I know people like that and it seems that just when they’re about to go broke they either get a promotion at work, mommy and daddy bail them out, they simply walk out on their debts, or they marry someone who pays off their debts.

They never sacrifice. It’s not in their vocabulary and life seems to agree with them.

While the bankruptcy rules may have been stiffened, I can still name examples of people who walked out on their debts: Just look at that 24-year-old 2.2 million dollar debtor out there. He’s on vacation in Australia, no?

I suppose once you have a house and a job, it doesn’t matter if your credit is trashed, even though I prefer mine to remain a bit stable. While you may consider her style “wrong,” it’s just another choice and odds are Gillian is good at getting what she wants with minimal expenditure of effort. Just look how she suckered you into giving her “free” advice without charging her a dime. If you had given her your “consulting fee” instead, she would have balked seriously no doubt.

Come back in a year and talk to Gillian again. She will probably have a fat retirement account and still not paid off her debts or someone bailed her out. She may even have refinanced her house to support her lifestyle and doesn’t count the additional monies taken out as debt. That’s the kind of answers she’s looking for. Of course, someone who knows those financial gymnastics will want to be paid for their advice. She wants something that requires her only to shoot a bit of money in its direction to solve the problem. Or, that require someone else to do the work and her to reap the rewards.

Just because you have a little more integrity, doesn’t mean she doesn’t know how to clear her accounts. She does. She just wants someone else to do it for her while she does nothing, not even pay for advice to help her out.

I used to be Gillian, and I had $6K in credit card debt, no savings, no retirement fund, and I was still clinging to cable TV and other frivolous things and habits that added absolutely no value to my life, monetary or otherwise.

You are correct when you say that you can’t help Gillian. She has to be the one to decide between having emergency and retirement savings or watching ESPN and HBO. If she reads your blog, I’d simply like to tell her this: ESPN, the housekeeper, and the cellphone won’t pay for car repairs, medical bills, or a nursing home in old age. I hope for both their sakes that she and her husband turn things around soon. Having been there myself, I know what a difference it makes when you let go of the things that don’t matter, and suddenly you can save money and sleep at night.

Definitely a good post here. Although I think the story is made up (that’s beside the point), the idea behind it is very true to MANY people here in America. We have problems yet people don’t want to make sacrifices, and for that, these people deserve everything that comes at them (bankruptcy, foreclosure etc.) I have no sympathies for anyone that gets into trouble on their own, but doesn’t want to bail themselves out of it. For that is what I call pathetic.

Chance wrote: The behavior of Gillian and Tina is awfully similar to that of people suffering with obesity.

Absolutely. Many people have remarked on the connection between sound financial habits and sound food/exercise habits. There’s a clear connection. The same principles apply to both fields of life. I should write an extended piece on the subject.

Sam wrote: My husband and I have talked about hiring a cleaning service.

I don’t want to make it sound like I’m against a cleaning service for everyone. I’m not. In fact, Kris and I have somebody coming in today. But we can afford to. We’re not hurting for cash. In Gillian’s case, getting rid of the housekeeper — even for a few months — would help her free up some cash. It’s a luxury she can’t really afford at this point.

Tyler wrote: Although I think the story is made up (that’s beside the point)

I don’t know whether to call the story fiction or non-fiction. It’s certainly based on an actual conversation, but the details have been heavily altered so as to obscure the source. I have many friends who read this site, and I have no desire to create any tension among them. Best to keep things heavily anonymized. I did my best to retain the essential elements, though.

I think you gave up too early, or at least you took the wrong tack. It doesn’t follow that someone who couldn’t give up little things couldn’t give up big things.

Sometimes the big stuff is easier to do away with than the smaller stuff. It’s that whole cost vs. utility thing again: the utility per dollar of a cellphone is way, way higher than the utility per dollar difference between a used car and an SUV.

Considering the savings, loss of utility, and the effect on self-image, you end up with:

Between those two things, getting rid of the SUV would probably have been *more* palatable than cancelling the cellphone. The “return on investment” of trading in the SUV is far higher than that of cancelling the cellphone, because the expected “income” (savings) is higher and the “costs” are lower, since instead of giving up functionality she’d be giving up a bit of conspicuous consumption.

Good point, The Tim. I’ll change that sentence to make it read more clearly. (With as much revision as I made to this post — there was a lot of it — you’d think I would have caught that, but no…)

That quote is actually one of the most accurate things in the story. And it’s exactly what made me think of the Dave Ramsey thing, which I’d just heard a few days before. I’ve met other people like this, too. I have a close friend who doesn’t understand the very basic principles of a bank account. If he puts money in there, he expects it to be there, even though he may have already written checks that use it all. It boggles my mind.

Also… sometimes it’s a choice of values. For example, if you really value your *time*, maybe the cleaning service is worth it, but, you’d be willing to drive an older car or live in a smaller home. If television is a source of real enjoyment to you, perhaps you’re willing to give up the cleaning service.

We could spend less money on food, but, we prefer to support local agriculture & have higher quality food. Of course, it also means we don’t eat out as much, and, we don’t have cable. I use my cell phone so rarely that I use a “buy minutes” service rather than paying more for a “real” cell phone, but, I *know* I have it for emergencies or the “I’m going to be home late” calls.

Is there any part untrue in what I cited on my blog? If it was not an SUV, I will write “car.” If the emergency was not a wrecked car, I will remove the reference. If it was not $4k/mo after taxes, I will remove the number. Thank you.

I agree completely with Rick Lafferty’s comments. I know that the lifestyle changes for me would be extremely difficult if I were to have to give up cable, cell phone, or a housekeeper. To me, these are not optional at this point; they enrich my life too much to cancel.

We have contemplated switching to less profitable jobs for lifestyle reasons, and I have created a list of items that we would do without, and none of these have come close to making the list. (on the list are: limiting eating out – this would be a substantial savings for us, as it is our biggest expenditure by far, bigger than mortgage; cancelling dog walker; downgrading vacations – easier to do if we had more flexible schedules that we would be able to use to plan; cutting out massages; going to a less-expensive hairdresser; and a host of other things).

On the other hand, my husband and I share a 5-year old Civic, and we do not plan to replace it anytime soon. To me, that would be wasteful.

We certainly make enough money to afford two luxury cars, but instead, we choose to save more money for the future.

In the meantime, in addition to maxing out our retirement accounts, I make several transfers a month to savings, so that at least twice a month my husband and I have to discuss how we are “low on cash.” This makes us just uncomfortable enough to make slightly better financial decisions on a daily basis, for at least a few days a month. I implemented this practice about 4 months ago, and I credit it for the substantial nestegg that we have accumulated since that time (3 months expenses – if we cut back as described above – so far). Prior to that time, we had no savings other than 401K.

If her friends aren’t going to understand the need to give-up the cell phone, how are they going to react when she shows up somewhere in a USED small car. That would be when they think there is something wrong with the picture.

Hi JD, thanks for this great writing (and wonderful blog, by the way). I used to be spendthrift myself, and unsurprisingly complained often about being broke.

One day a year ago, a friend of mine recalled a phrase taken from the film/book ‘Fight Club’, it goes something like this: “We work in jobs that we do not like, so that we can buy things that we do not” Boy, it hit me real hard because it was the truth for me! Today, I am thrifty person who is reaching her goal of clearing a $12K student loan this Christmas, building an 6-month emergency fund and learning to invest wisely.

I think the main problem with your friend Gillian is: she hopes that budgeting will help her solve her money woes, WITHOUT affecting her current lifestyle. But, real change will only take place when one is willing to face the truth painfully and honestly about financially destructive habits. Most importantly, one must believe in the value of the need for change.

It’s a little surprising to me that no one has commented thus far about how similar Gillian’s story is to someone with an addiction, such as gambling or alcohol. She has all of the symptoms. Materialism and consumerism are as much of an addiction in today’s society as other, more taboo, forms of addictive behavior. TV cable is her “dealer” in this case.

As with other forms of addiction, Gillian must be the one to help herself. She will need to do the tough work to get to the other side. She is obviously not happy. Once she gets to the other side, and escapes the bonds of materialism and over-consumption, she will wonder how she even got there in the first place. Life will be so much better.

Heh. My working draft of this entry is saved to my hard drive under the simple title “I Can’t”. It was the repeated use of this phrase during the conversation that prompted me to write the piece in the first place. “I can’t. I can’t. I can’t.” Then you won’t.

I agree with the previous posters who made the arguments towards perceived value. Personally? I say keep the housekeeper, ditch one of the SUV’s. But that’s what I perceive as valuable. JD is right, she and her husband and to sit down and decide what is really important to them: Keeping up the facade of having all this money and being wealthy, or actually living life on their own terms.

When you think about it, it could require a lot of self-reflection on their parts that might lead to places that are too uncomfortable for them to confront.

This is one of the reasons why I don’t give spending/saving/lifestyle advice to friends, even when they ask. Whether or not they’re “ready” to hear it, they should hear it from someone who doesn’t have an existing relationship with them, an impartial party, so to speak.

It’s like the clinician who comes in to work with a class of students, and tells the class the same things the teacher has been saying all year… the class listens to the clinician because they are from the outside and they validate what the teacher has been saying, while the class simply gets used to the teacher and doesn’t internalize the lesson as well without the clinician.

This story is very sad, but there is hope for people like that. Don’t give up on her, she might see the light some day! If she could see, really SEE what that debt means in her life, she might realize there are more important things than having new cars and keeping up with the Jones’.

I was in an insane amount of debt earlier this year when I woke up and realized what I was doing to myself. I sold my cars and simplified the rest of my life. I cleaned out my house, selling my computers, and anything I could find that had value on ebay, and paid as much debt off as possible. I went from 68k in debt in January to 15k right now. I even took it to an extreme by volunteering to go to Iraq to earn extra (tax free) money. I will be debt free by September.

I recently started a blog about it, and hope to encourage other people that are staring massive amounts of debt in the face.

Great story, really got me going emotionally. I completely identify with Gillian (the old me) and You, the me of the last five years. Personally, I would have bluntly stated to my friend that you are not ready for change, you just want to talk about it. Bottom line she is not ready to do the work. But then I likely have a more confrontational personality than you, which makes reading your blog more enjoyable. Thanks

With all due respect, I have a difference of opinion from the author of this piece on both how this issue was approached and how the story was presented. Overall, I found the piece somewhat judgmental and lacking in acknowledgment that different people have different priorities and that that is okay.

I found that I agree most with the essence of Rich Lafferty’s comments–making larger changes can often be more effective, simpler, and less painful than making lots of little saving sacrifices. In this case, even if the author had taken the time to explore those and other types of options with Gillian, and even if she’d turned them all down, I still think the judgmental tone could stand to be toned down (To me, the piece reads very holier than thou).

But in this case, at least based on what is written, the author only offered one type of advice and when it wasn’t taken, wrote off Gillian’s entire potential and desire for sacrificing some things now in order to have a better future.

For some, and I am one of these people, life’s little pleasures are very important and are often the things that keep us sane and happy in a difficult world. Having our entertainment (TV), our security (knowing we have a phone in case of an accident or emergency or can reach our spouse when needed), hobbies (plants/gardening), etc. can make a tremendous difference in our quality of life and contentment.

Hobbies, expensive or not, are very important. Life is not all about work and saving. For some, daily comforts, hobbies, and passions for entertainment and recreations are some of what makes life worth living and joyful.

Though some expenses were clearly important to her, Gilliam may have very well considered downsizing her home, her car, and other larger, more expensive purchases. These would likely make more of a differences in her overall spending/saving anyway, and wouldn’t interfere with her quality of life.

I don’t know Gillian, so perhaps she wouldn’t go for those suggestions either, but based simply on what is written in this post, it seems the author decided she simply wants to change her finances without having to give up anything, when in fact he’d only explored one type of change with her and judged her solely on that.

Additionally, she may have been willing to find ways to increase her income so that she wouldn’t have to give up the expenditures on things that obviously meant a lot to her. That was not mentioned or considered in the post either.

Like Gillian, I value my hobbies, security/safety, entertainment/recreation, but for years I have lived in the cheapest home I could find, almost always in a much smaller space than most people in my situation and with my salary would have chosen, and have always paid little for housing, car, travel, electronics, and other major expenses.

I have saved in areas where many others might choose not to, or choose not to save as much, and perhaps spent in areas that some areas would be more likely to save in. But since those expenditures added value to my life, the trade off has always been worth it.

Saving on bigger things has allowed me to splurge when it came to some of the things that matter more to me and make a large difference in my daily happiness, such as being able to enjoy my hobbies of cooking, art, reading, etc.–all things that add tremendously to my quality of life, something that cannot be measured with a price tag.

I appreciate your point that we should evaluate our own behavior and make sure we are not standing in our own way and preventing our own financial stability and success, but I also wouldn’t be so quick to draw conclusions about others simply because they don’t act as you would or as you expect.

Our finances often reflect our priorities and it’s important to respect that others may have different priorities, but that doesn’t make them any lesser or less legitimate than our own. There are ways to make finances work without having to replicate just one model of spending/saving.

People get used to lifestyle inflation. We all were broke during our college years, but we got by. I try to keep that college mentality (use all your space in your small place, cook for yourself, party at friends homes, walk, dont spend money, work extra jobs).

I think that people with chronic overspending problems just don’t get it in the same way that people without them do. Somewhere, they fundamentally don’t understand money – probably they don’t understand that its all psychological. I think once you do that and address the underlying reasons for spending more money, you’ve got a much better chance.

I’m not a fan of budgeting. The best advice in most of the personal finance books I’ve read is “pay yourself first”. I highly doubt that Gillian and her husband are living so close to their means that they have to cut out things like cell phones and cable.

More likely, if she set up an automatic deposit of $200 a month into a savings account, she wouldn’t even notice the difference. No need to cancel the maid or itemize everything they’re spending money on. If they’re spending exactly as much as they earn now, they’ll spend exactly as much as they earn then, and have $200 added to their savings. People who are used to spending as much money as they have are not likely to worry about whether they have $50 in their budget for shrubs. They are likely to know whether they have $50, period. If they start out “having” $200 less at the start of the month, their spending will adjust.

People are so funny. I was in a similar situation last month. I was out on a smoke break with my coworker MammaBear, and she was talking about how her expenses were just plain more than her salary, and she asked me if I had any suggestions. I suggested she cancel the cable (she has an 80% chance of having it never turned off where she lives), cancel the netflix account, and upgrade the expensive dialup connection to a slightly cheaper DSL account that can be used to creatively supplement what she lost. “oh, i’m not sure i wanna make that change,” she said, “but they’re good ideas. I’ll think about it.”

As far as not giving up the cell phone, that I can understand. My cell phone is how I communicate. If it weren’t for the fact that I can’t get reasonable DSL bandwidth without also paying for a landline, my cell phone would be my ONLY phone.

Ugh…people who think this way make me crazy. It’s just common sense *money-in* and *money-out*. If they’re equal, there’s nothing left to save.
Another favorite is a friend of mine who never balanced her checking account, and she would get really annoyed when someone would cash a check after a month or so because she assumed that the cash in the account was the amount of money she had to spend. There would be an OD on the account, and she felt the person who cashed the check was to blame!!
Great, if aggravating post. I’d avoid talking to her about money if I were you. It’s just going to hurt.

@Aleks – Paying yourself first does not work if you’re in debt and spending more than you make. Earning 5% on $200 savings/month will get you nowhere fast if you’re paying 12%+ on a revolving credit card balance and $30,000 in car notes.

See I don’t mind cutting out things and being frugal..but it drives my husband nuts…i cant get through to him how important it is that we stop being broke…one day he’ll say he agrees with ne…then the next he throws a fit because i tell him we dont have money for a video game or a vacation.

This is a great post. I’ve been trying to talk to my parents about how they can save money. They have no savings, yet make over $100k/yr.

They are paying nearly $200/month for a cable/internet/landline package which I think is outrageous when you are barely cutting it month to month, but my dad refuses to get rid of his DVR (which costs extra) and cut back to basic cable because of the ONE channel he wants that is in the upgraded package.

Thank you for your thoughtful comment. You make some great points. I can see how I might have come off as judgmental. That wasn’t my intention. I’m not sure if you’ve read Get Rich Slowly before, but Gillian is in the same place I was just a few years ago. I’ve managed to turn things around, but it has been through sacrifice. I didn’t include this information in the piece because my regular readers are well aware of the fact, and I thought it was too long already.

I actually don’t feel that it’s my place to judge Gillian. I merely meant to express my frustration. I’m offering advice drawn from my experience, and in my experience giving up these things can help a great deal. Also, it seems to me — and perhaps I’m wrong — that by choosing, say, cable television over an extra $50 a month, Gillian is saying “cable television is more important to me than financial security”. Why do I say this? Because it’s the things that we do that reflect our values, not the things that we say. I can talk all day long about how I wish I were physically fit, but until I actually get on the damn bike and stop pedaling, it’s not an actual value to me. Does that make sense?

I haven’t wholly given up on Gillian. In fact, I’m researching budgeting resources for her right now. I’m also writing an article about how to stop living paycheck-to-paycheck that I hope will address some of her issues. I agree that we are all different. One of the core tenets at Get Rich Slowly is “DO WHAT WORKS FOR YOU”, by which I mean that we are each different human beings. We each have a different psychological makeup. For me, the debt snowball was the only way I could conquer debt. Others view this as a waste of money. What is right for one person, may not be right for another.

I do hope that Gillian is able to conquer her financial demons — I just wish that my advice was something she could use.

“Paying yourself first does not work if you’re in debt and spending more than you make. Earning 5% on $200 savings/month will get you nowhere fast if you’re paying 12%+ on a revolving credit card balance and $30,000 in car notes.”

Obviously if she’s in debt, the $200 should go on the debt rather than into savings. But the point is to take it off the top rather than trying to force a non-budgeter to budget so there’s something left at the end of the month.

Oh my, I have someone in my life who’s like this! They are forever complaining about how broke they are and then will turn around and tell me how they’re going to this concert, or to the fair, or buying this or that at the beauty supply place. On payday they complain about how they need more money to survive, that if their room mate moves out they’re “screwed,” and oh, by the way do you want to go out for lunch today to the expensive little eatery down the road? It drives me nuts! I lent some financial books to them, then asked for them back when it was obvious they weren’t going to read any of them. They’re one of those people who always has a reason why they cannot do what anyone advises, be is someone they personally know or someone who’s written a book. They even told me one time that Dave Ramsey would never work for them because they were behind on everything and that his program was for people who just wanted to get out of debt. Now, does that make sense?

Some comments either said or touched on the thought that changing spending with small adjustments to their behavior is best, rather than making changes that are large/substantial.

This is exactly wrong.

Personal finance is 80% behavior. Gillian needs to do a complete 180 from her spending, and she needs to do it RIGHT NOW, or she will never control her money and it will always control her.

She’s in denial. Like most of Americans that spend more than they make. Dave Ramsey says often that the average millionaire doesn’t know who got kicked off the island, or whatever fad TV show is popular. They are busying themselves with MAKING MONEY. Thats HOW they became MILLIONAIRES.

These are people that are highly effective. They are in attack mode. People like Gillian are not effective. They’re victims. Victims of their own circumstances and bad decisions. Maybe some day she’ll get a clue, but today is not that day.

I actually think you went a little too far too fast with Gillian. If you really read Dave Ramsey, et al. you’ll find that BEFORE they start having you start looking at things to cut, you first get them in the habit of simply tracking how they are currently spending.

Instead of starting to identify ways for her to trim the fat, you should ask her to simply set down on paper her monthly income and outgo. Then give her the task of tracking every penny she spends for a week. A month would be better.

The idea is to get GILLIAN herself to start to really see where the money is going. Then over time she’ll start to see places where she could economize. Maybe it’s the cleaning service. Maybe she’d rather cut down on food expenses, etc.

But before you can go there with her, get her to simply track where her money is going. A single conversation won’t do the trick.

Interesting post. I have never had a housekeeper, but the result is a slightly messy apartment. =) It works for me for now!

Cell phones these days aren’t seen as luxuries. Of my peers, if someone did not have a phone, they might be seen as an alien. No cable? Frugal/cheap, but sure, whatever. No fancy car, sure. But no cell phone? How do you survive? (most of us, it is our only phone) But the iphone–that would be a luxury!

Wow – that really reminds me of myself and my best friend. I finally learned that in order to get out of the mess I am in, I have to change my lifestyle. I have a big electronics fetish and I have to have the latest toy. I have just turned 30 and I have started to cut the “crap” so to speak to take care of the things that really matter. Now, my best friend, on the other hand…says he can’t afford car insurance but will go spend money on clothes at an expensive store…why? Because it was on sale!

I also have this same conversation several times per month. People come to me because they “don’t know how I do it” or think I have some sort of hidden income.

Most run when I say it’s not so much how much you make but how much you spend. The rest back away when I start talking about cutting expenses. Many even in ways that don’t really require sacrifice, just a bit of effort.

Regarding credit issues, 9 out of 10 people don’t even want to spend the time to pull their credit reports or write a letter to a creditor. Even when I tell them that just a few hours of work on their credit can make a huge difference.

When I tell people that my cellphone costs and average of $7 a month or that my electric bill averages $28 for a large 2bd condo with all electric appliances and the usual cutting edge technology and toys, they think I’m lying. I won’t even mention I feed a family of 3 on $200/month because they assume we’re starving, when actually we are eating much healthier than them. If I mention I have credit cards with over 100k in credit lines yet pay them in full every month, they think I’m crazy.

They think I have some kind of hidden income or trust fund because I live better and have more on less than what they make.

I used to enjoy discussing these things with people but anymore I say screw em. Let them blow their money all they want. It usually ends up benefitting me some way.

Thanks for this great post! I used to be a spendthrift myself, but quitted this financially destructive behaviour a year ago. Today, I have proud to say that I am thrifty and money-wise. And, I have been passionate about sharing my financial views with friends around me, but most of them give me a queer look. One laughed at me for behaving like an ‘old maid who counts her pennies’. Nowadays, I just keep my mouth shut, even though I feel like telling them the truth about their spending behaviours. Most of them earn more than me, but I believe I will be ahead of them financially years down the road. So I guess it is to each his or her own, let time do its job then ;>

I’m curious about an $50 dollar electric bill, much less $28. In a good month, mine in my 800 sq ft aptment is $150. In a warm month, it’s more like $250-300.

But anyways, I think JD did a good job, and his psychological analysis is very true. actions speak louder than words.
I agree with his method too. Selling a house or a car takes money, so if she can’t afford car repairs, she couldn’t swing a favorable house or car sale. Quitting the cleaning service or cable for a while might help with that, but she needs to start with something.

To get our bill down to we try to watch what we use – but that does not account for the fact that we have a gas furnace and dryer – (which runs from $30 in the summer up to $250 in the winter). We have an old 3 bedroom house which does not have central air, but was built to vent. We use windows and fans to keep the house cool in the summer. We do have a small window air which we run in the bedroom when it gets really hot. We can usually keep the house around 75. We live in Nebraska so it can get really hot, but we can keep the temp down until it gets to be over 100.

And we all know that making more doesn’t help, because we just spend more. You hit the nail on the head with the first part. We have to first learn to live within our means, whether we make $20K or $750K, and cut from there.

OK, I’m a little sketchy on this, you say they bring in $4000 per month together, which means that both are making in the mid twenties after taxes. I don’t what part of the country this is but that is a pretty working class salary in most places. Did you mean to type $4000/month each?

But assuming it is $4000 together:

–a nice custom-built home.

Pretty pretensious for a low income couple. Did they buy the house planning to have kids and wanting them to grow up in a good neighborhood with high achieving peers? If so, then the expense would be worth it. See that movie, The Slums of Beverly Hills, for a reference.

–Each of them drives a late model SUV.

Late model SUVs are pretty safe cars to drive if you value your life. Minivans are safer because of their unibody construction, but some SUVs have unibodies. Trucks sell at a premium because of their business uses. They could trade in for something that is perhaps a few years older. Are they also taking care of their health in other ways? Do they have real professional ambitions that require having a decent car? Driving a late model car can make a difference; Frank Rambauska, the sales consultant says so, and I believe it based on personal experience. If they are lower level sales or realty people who need to maintain an image, I could sort of see the expense, although it is clearly not deductable.

–They enjoy expensive hobbies.

This is clearly an expense that can be cut, unless it is something like golf which can be utilized for business purposes. Can it be deducted? Are they actively networking and trying to advance their careers? Again, it seems much for such low salaried people.

–“I have friends who make half what Gillian and Tom do, but have built a nest egg because they maintain a frugal lifestyle.”

Building a nest egg on $12,000 per year after taxes?

A housekeeper is way too indulgent for a couple making that little.

Cell phones are pretty necessary but there are cheaper options out there. I paid 20 for the phone and about 10 per month in fees, and use my land line for the rest.

Cable could be cut back. If you are working long hours I can kind of see it as an indulgence, but then why are they making so little if they are working long hours?

I recently moved across the country and sold all of my things, and most of my friends are asking whether I’ve bought a new bed, whether I’ve bought a new sofa, a new TV, a new kitchen table, etc. I can’t afford to do that right now since I used a huge chunk of savings to make the move. So until I build that up again (and then some), my only furniture is an air mattress and two chairs, both bought on Craigslist for a total of $90.

And you know what? I couldn’t be happier. Instead of coming home to a bunch of new furniture that I would have to put on my Visa, I come home to a clean, tidy and simple home. I don’t have to worry about how I’ll pay off that debt.

I say all of this because Gillian may find that if she loses some of the luxuries, she might not even miss them. The peace of mind brought by living within your means is inestimable.

JD – I completely agree with your tactic and the way you handled the situation.

I’ve been quite lucky in my life that I have had great friends. They have been there when I’ve had it rough, and I’ve been there for them. A couple of times, two of my friends have mistaken my ‘kindness’ for some sort of enabling.

Take for instance, one of my friends who would call me up when I was overseas and talk about how she was suicidal. And she’d talk about how her life stunk, and how she was going to do this and that. So, at first I tried to help her out “Well, first things first, you need to get up and brush your teeth. Just do that…” and she wouldn’t – it was too much work. From having been in her situation a few times myself, being depressed beyond all recognition, I know what she was going through. I didn’t want to be helped. I wanted to wallow in my self-pity. I wanted to have a pity party, I wanted to wear the pity hat and I wanted the pity gifts. My friend was no different, sure she needed medical attention, which she ended up getting, and she needed someone to look in on her, which I was able to arrange through a mutual friend, but I couldn’t force her to do anything. If she wanted to kill herself, there is nothing within my power that I could do to stop her. She needed to pick herself off the floor and help herself out before asking others for help. Once she made that initial step and was lost, the other help is a lot easier in coming. I ended up making our conversations shorter, and being a little more unavailable, and also changing the subject to move along to more positive things. I also did call her to make sure she was okay, but I wouldn’t let her talk about her. At a certain point I had to cut that off.

I agree with JD; and I believe if JD would have gone along with her bs, he would have been enabling her as well…. in that his friend Gillian was doing the exact same thing. “Oh feel sorry for me cause I’m broke”. Well, you can do this this and this. “But I don’t want to”. I agree with JD – its not a holier than thou outlook, its the idea that the universe helps those who help themselves. JD can’t force Gillian to stop using her cell phone, or to cut her cable. So if she is resistant even at the idea of doing those things, chances are that she isn’t at that point where she is really willing to give up control of her finances/ circumstances to really make a difference in her behavior.

Even though I really really really hate Dr. Phil (really), one time he was talking about behavior modification and said something like this – if your friends say something like “wow you have really changed your behavior 100%” then you are probably on the right track: because in order to shift your behavior, you have to take measures so drastic that they actually are noticeable….

In my case with money, it meant shifting down from an apartment, to a shared living space. Sure people at work ask my why I don’t own my own space – well its difficult when you are paying off $30K in debt – but I’m not willing to carry that debt around with me in order to meet the status quo.

Ah, but that’s just it. Its socialized, and its peer pressure. I don’t think in order to be a good friend you have to be an enabler; sometimes calling your friends on their b.s. is just as important.

I’m not the best example of financial wisdom, but I do have more clues than I used to.

The issue of cable TV was not a problem for me. I cannot stand those moron tags “corner logos” so to me broadcast TV of all types (air, cable, satellite) has been defunct for over a decade. My internet connection is cable with the bare minimum TV possible, they charge more for internet-only. My land phone is a VOIP service run on my internet link, 1/3 the cost of the old telco service and insane calling areas and feature sets. (I still don’t know what all the features do.) I’m looking into DSL if I can’t get the cable guys down some more.

On the other hand, I can relate to the Gillian situation. A friend was complaining to me yesterday about his larger-than-expected electric bill. He has been complaining about the bills for years now. I have tried to get him to spend half an hour doing a first-level electric use check, by having someone watch the meter while he toggles breakers. He complains he has no time to do it. He wants to get the utility out to change the meter because “there HAS to be something wrong with it”. This will easily lose him a day minimum because large utilities only deal in time units of entire days. I’ve suggested that he find all the gadgets powered by wall-warts and put them on switched power strips. No dice. Telling him to turn off the computer when he’s not going to be using it for several hours hasn’t gotten through either. For a technical geek, he sure has no idea how small power drains add up.

As for my computer, except for some of the disk drives that had to be replaced due to heat failure (the side is off the case permanently now), the power supply (white sparks, whee!) and the memory chips (crashes when memory got close to full) the whole thing is second hand parts. This includes the ancient laser printer and the LCD monitor. I’m a computer geek, it’s what I am and what I do, so I cannot realistically be without a computer, but I’ve done it the low-cost way. I find that with a little planning, the multi-tasking nature of a computer can get a lot done in short amounts of time. I also manage my finances with it.

Cheap eats: Breakfast cereals for dinner. Not all the time, but a fair bit. I mix taking in lunch with eating out at the office.

DVDs from the sale bin at the rental stores, dollar stores and no-brand supplies where feasible.

I have a doctor friend who was recently discussing obesity, and how overweight people will come in to her office and say “Doc… I’d give anything just to lose this weight.”

So she suggests biking to work (don’t have time), taking the stairs (too much work), not eating at McDonalds (don’t have time to cook at home), making other healthy food choices (but I like food), going to the gym (nobody to go with) and on and on and on.

Then they say “Isn’t there some kind of pill you can give me to, you know, jumpstart this?”

Like those obese people who aren’t actually willing to give up anything at all to lose the weight, Gillian isn’t willing to give up a damn thing to get her house in order. She wants you to give her a magic pill – and even if you had one, she might stay on the wagon for six months or a year, until she’s decided she’s saved enough (lost the weight) and then revert right back to old habits.

And, just like yo-yo dieters, she’ll find herself back at square one, and once again asking for the magic pill.

It’s about life choices – commitment. Yeah, they’re hard. Yeah, it sucks. But sheesh… I wish people would at least be honest with themselves. I think this finger-pointing, blame-assigning entitlement society we live in might just be the end of us all!

Here’s a question: When we spend like the examples given in the Gillian anecdote, what are we really buying? Here are some ideas:

A) Symbol of success?
B) Paid for experience?
C) Time savings?

So here’s my analysis:

1) Fancy house gets you mostly A and arguably B.
2) Same with the SUV, A and B.
3) Housecleaning is probably mostly C with some A and B (where B is more like the paid for “non-experience” of cleaning house).
4) Cable is B, mostly, of course.
5) Nowadays, I’d say a cell phone is C, with the time savings being potentially critical. Early on, they may have been equated to a symbol of success, but not anymore.

For those of us that don’t value symbols of success in the same way, prefer our experiences to be minimal dollars per hour (or free), and manage our time differently, Gillian’s approach may seem silly. Her approach sure leads to a more fragile financial state when perturbed by an event such as a vehicle accident. A value therefore that Gillian may not hold is ‘risk management by the self.’ But that’s a side note.

Finally, I have an anecdote of a businesswoman. I was reminded of her while reading this post. Can you believe it? Her name is also Gillian.

Gillian owns commercial real estate, a small number of modest strip malls. She maintains all of the landscaping by herself. She is rail thin and healthy in appearance. She considers the site work that she does to be a substitute for a gym membership. Is that wild? I have to admire this approach. She took two things that she wants and values. They both would normally cost dollars. By merely adjusting her thinking about them, she acheived both without paying those dollars out. Brilliant. Her properties are real ‘lookers’ too, just like she is. Go Gillian.

I read somewhere (possibly in _The Millionaire Next Door_) that an “atmosphere of scarcity” is helpful if you’re trying to save serious money. Like poster #18, I have deliberately set things up so there’s not a lot of wiggle room in the budget after paying ourselves first. I do have a slush fund from which I can transfer money to tide us over, but it really makes both of us think more carefully about our spending if there’s $50 in the checking account as opposed to, say, $500.

I can empathize, partially, with Gillian. There is a slight difference though. When my husband and I ran up our one credit card, we would pay it off quickly. We had the money to do so. However, by paying it off, we had no money in savings. We had no debt but no savings either. So if an emergency came up, we had to use credit. And we ended up in a cycle of credit card debt. We have paid off our credit cards completely several times. We are now trying to make sure we not only pay them off this time but factor in savings even as we PAY them off.

We have two cars but no car loan. We have found places (yes the cable!) where we can trim our budget. And if we can bring in extra income, we will meet our goal in March 2008! I read a lot but we bought books – I’m only reading what I find at the library now. I do secret shopping, freelance writing, my husband does ebay. Anything that will bring in a little extra to help us meet our goals. We have a budget now and we have stuck to it.

Wow, lots of good points above, especially the pay-yourself-first thing which I bet would totally work for Gillian.

I have also had friends who complain about something and then reject every possible solution. Grr–so frustrating! In fact, I’ve done the same thing myself–if I could have thought of an acceptable solution, I would already be using it.

But I have to say that I don’t really think it’s true that you have to make sacrifices to get your spending in control, at least not at this income level. You just have to make different choices. Instead of saying “how about giving up” this or that, recommend an alternative to this or that. Why do they need a maid? Don’t like doing housework. Why not? Too boring, strenuous, time consuming, not fun enough? Can you make it more fun by blasting some music to sing along to? Make it seem less onerous by setting a timer for 15-minute intervals once a day? Make it more enticing by each picking a task and racing each other to get through it, and spicing up the competition with some very silly trash talking?

Need phones to communicate? What are some examples of situations where you use the phone? Are there any other alternatives? (Note: pay phones are harder to find these days.)

They always watch TV. Why? To relax? For entertainment? Could they relax by gardening? Have her list all the things they’d like to do if only they had the time, and then list all the things they actually do and see if a few switches would make life more fun and also save money.

Another strategy is where you commit to a change for a single month and see what happens, because often when you think something will be a big sacrifice, it either turns out not to be or actually turns out to be just the opposite, but you never in a million years could have guessed it if you had never actually made yourself do it. You could ask her to try one crazy-sounding thing each month. Then keep doing any of the things that turn out to be just fine. (For things like cell phones, you could keep paying for it but try never using it and see if things are as crazy as expected.)

Also note that what seems extravagant to you may not seem extravagant to her and vice versa. On the other had, she may be unwilling to make any change at all, just as you fear.

Back at post #19, Ted Valentine wrote, “This is conversation was as much a man/woman thing as financial.”

With all due respect, I call bullsh*t on this. Read through all the rest of these comments–you’ll find that both men and women have been in Gillian’s shoes, and both men and women have played the role JD did in the conversation.

Also, I think the connections people are making between financial irresponsibility and obestiy are rather overstated. In finances, every formal transaction requires a receipt or statement of some sort. Tracking every single penny in and out is a big job, but it is possible, and made easier by all those little pieces of paper. Even if you do a lot of earning or spending “under the table” you could still count money out and write it down.

Calories just do not work the same way. Studies have shown time and time again that people cannot tell how many calories are in something by the experience of eating (taste, mouthfeel, satiety) alone. Even careful tracking with an extensive database from which to draw is subject to more uncertainty than you’d think, especially when it comes to dining out–and even to some extent when cooking at home (can you accurately tell whether you took 1 TBS, or 0.7 or 0.5, of butter when you butter your toast?)

Furthermore, calories expended are a total “black box” for most people, barring extensive analysis from a physiologist. The amount of baseline calories a body needs to survive every day not only varies by mass, but also by fitness level and factors related to individual metabolism. “One size fits all” values like 1200 calories/day are wildly inaccurate–and would be unwise to try to attain–for many many people. Likewise the values stated for how many calories burned per hour for various exercises are averages, and the actual expenditure for an individual can vary greatly.
Finally, metabolism is complicated; it can and does vary *for an individual* depending on many factors.

All this by way of saying, money can be assessed arithmetically, in terms of income and outgo. Any ape with a calculator can calculate cash flow and net worth. But that calculation is just not possible in an accurate or meaningful way for most people’s calories. And regarding calories in this overly-simplistic way, without acknowledging that there are physiological factors outside of conscious control, is a big part of why so many diets fail.

I already have a Nobel Prize waiting in the wings for the next person who pipes up with “eat less, exercise more”. Yep, that works, but the devil is in the (obscure) details and that’s where most people have problems.

I’m a guy, not a she. Fulltime single parent with 12 and 14 year old kids.

To answer some questions;

Electric bill – Most of my savings come from frugal usage and efficient appliances. A new refridgerator trimmed almost $10 off of my electric bill. I run the freezer at 5 degrees and the refridgerator at 36. Any empty space in the freezer is filled with ice(water in plastic bottles). That helps it run more efficiently. That can also come in handy if there’s ever a power shortage. I have a radiant cooktop, oven, dishwasher and microwave in the kitchen too. They get used as often as you’d expect. I cook every day.

I have electric central air/heating. This place is insulated well so they don’t run for extended time, maybe 5-10 minutes every hour during heavy usage. I live in southern California so the heat is barely used but the AC is used daily from around May to October. I keep nearly all of the windows shaded during this time.

All lights are low watt CFL. It’s actually rare that more than 1 or 2 lights are on at the same time and usually not for very long. Lights are never left on unless they are being used at the time. We have 2 desktop computers and a notebook that are used for several hours per day each. The TV only a few hours per week.(I’ve never had cable ever btw). Only 2 “phantom load” very low wattage clocks running. The washer/dryer gets used for about 5 loads/week. My lowest monthly bill so far has been 24 dollars and some odd cents. They’re usually between $28-29.

My 3.0 DSL costs me $18/month through AT&T. Cellphone, I bought a new Motorola L7 on Ebay, modded the software out a bit and use T-Mobile To-Go. Minutes are good for a year. It averages around $7/month for me including text and unlimited stock and foreign exchange quotes(I do some trading) through t-zones. I just don’t talk on it much and keep my calls short. I use my wireless notebook for the net away from home.

Auto insurance for two vehicles, one full coverage runs me $800/year and that’s living outside of Los Angeles. A few years ago I challenged myself to cut each individual expense and still evaluate them a few times a year. I’d estimate that I’ve trimmed over $500/month in waste since then. Years ago my electric bills were running $200 or more.

Food – Most of my savings come from avoiding pre-processed foods, junk foods and junk snacks. I do buy some organic, mostly vegtables. Fresh fruits and vegtables are cheap here. Rice and beans are a bargain. I buy meats on sale and freeze most of it. We eat a lot of stir-fry and such but roast beef and mashed potatoes aren’t uncommon either. I am so used to cooking and good with portions so there’s no leftovers ever. Lots of times those go to waste. We don’t over-eat. Many people eat way more food than they really need whether they’re overweight or not.

I also get back 5-6% on all my grocery expenses. 5% back on all gasoline. 1-2% on nearly everything else. This comes from using cash back credit cards. Almost every bill I have gets paid through credit card and then paid in full when the statement cuts. Also, while those expenses float, the money to pay them sits in the bank earning 5%. All my bills, statements, etc are online. I don’t get much mail since I’m also opt’d out with the bureaus, DMA, etc. Paper is such a waste in so many ways. I use yodlee.com to track everything, including expenses.

A side benefit I believe to avoiding pre-processed and junk foods is that neither of my kids has ever really been sick. They go years without a cold or flu and even then it was only a day or 2. Neither of them has ever taken a prescription drug, even antibiotics or even an OTC other than a rare aspirin or ibuprofen their entire lives so far.

I learned much of my frugal sense from growing up on a farm, the only male in an all female household. We grew and foraged most of our food and canned and preserved enough to last throughout the year. Heat came from wood cut from our forest. Never had TV. Most of my neighbors were amish and amish own that farm now. I hope to return to that type of self-sufficient lifestyle someday although in a more modern cutting-edge type of way.

Who making 12k/yr pays taxes? I’d imagine at the end of the year their net income tax expense is near 0.

I know of families making less than 20k a year living rather well, no debts, with decent homes and land with no mortgage. It can be done in some areas and with the right mindset. You can find some here @ melissas forum – http://homesteadingtoday.com/vb/forumdisplay.php?f=43

“So she suggests biking to work (don’t have time), taking the stairs (too much work), not eating at McDonalds (don’t have time to cook at home), making other healthy food choices (but I like food), going to the gym (nobody to go with) and on and on and on.”

That sounds like the average person. It seems like just about everyone I know says those exact same things.

The McDonalds things really gets me. I am within a mile of serveral fast food places but in the time it’d take for me to drive down to one, wait for the food, and come home, I could whip up a much better, healthier and cheaper meal.

Most of my routine meals only involve a couple minutes of time actually standing over the stove. And you don’t always need to cook to have a nice meal. Assorted raw vegetables can make a good quick meal. Fast-food sucks. Just about every perpetually broke person I know lives off of the stuff. They seem to get sick quite often too.

Getting rid of the cable TV is one of the most profound “trigger event” actions one can make to save money. It’s not only about saving $60 per month. When you don’t watch TV, you all of the sudden have *hours* of free time every day (I never believed how much TV I watched, but it was literally hours per day). You can use that time to exercise or hang out with friends, clean or cook or do a budget.

The other reason it’s so profound is that suddenly, you become immune to the pull of the shows shows and the ads. You become more confident in who you are because you’re not inundated for hours a day with advertisements convincing you you’re not good enough (so that you’ll go buy something to make yourself feel good enough.)Unless you live under a rock, you will still keep up with pop culture, because it’s everywhere. Read Star magazine for 5 minutes in the check out line and you get everything you need to know.

Keep the DVD player, though. You can probably rent all of your favorite shows on DVD (but you’d be surprised at how easy you can lose interest in a show when you have to make an effort to watch it)

Another solution that might have been more palatable to Gillian would’ve been to suggest cutting the house cleaner down to every other week instead of every week — saving $100 a month.

It strikes me as very likely that they can’t give up the cell phones, but shopping for another plan might save them some money, too.

Ultimately, it sounds like Gillian wasn’t really motivated because she wasn’t visualizing the real consequences of her spending habits. The car broke down, so they put it on the credit card — no real consequence. It would be worth while to ask a little more deeply about why she’s concerned about her current money situation — ask her to visualize the retirement that she’d like and really see that she can’t get there from here.

Er, who pays $60 per month for cable? **puts hands over ears** La la la I can’t hear you …

I’d love to cancel the goddamn cable. It’s a total waste of time and money, and I would LOVE to have the #)$*@_#%&#@ noisebox TURNED ***OFF*** more. But husband loves it. Damn it. ***I*** want to add doors to the goddamn tv room, but no, that actually costs more than $30/ month.

Interesting.
There is a TV show here in Germany called “Money Coach” (or something like that). In every episode he visits a family deeply in debt and tries to improve their financial situation. Just like you did here, he starts off by summing up monthly income and expenses, and calculates the total debt. Most of the time, they are surprised how high it is.
Then they try to cut down expenses. Some of it involves making appointments with the creditors to get lower interest rates. But then there is the part where they have to make sacrifices. And that’s when the “Money Coach” more often than not starts hitting walls. Getting rid of the second car? Using public transportation or a bike to get to work? No way! I’ve seen episodes which didn’t have a “happy ending” because they just couldn’t cooperate. Most of the times, it were the wifes offering the most resistance, not being able to adjust their lifestyle to the situation they were in… All in all I think it’s a somewhat voyeuristic, but very educational program. :-)

Great article. I just wanted to address the one person who said that someone in debt would “get nowhere fast” by putting money into savings. Savings is not an investment vehicle. If this lady lost her job tomorrow she’d still need to pay her bills, whether debt-related or not. Telling someone not to put money into savings because the return is not as good as the interest they pay on debt is one of the most damaging pieces of money-related advice I ever see anybody give. Everyone needs at least six months’ worth of expenses put away where they can easily get to it without penalty, no matter how far into debt they are.

Dana, I disagree. If she were to pay off her high interest debt she would be saving the monthly interest cost over the duration when she did not need the money – which will be a larger amount than her savings account would pay.

She can always borrow the money from her credit card again if necessary (i.e. if she lost her job) but in the mean time she would be “saving” 18% interest vice “earning” 3%.

It is not ideal, but in her situation it is the best option (in my opinion). The 18% APR means that her total owed will double every four years – that’s a very fast interest rate, and I’ve seen many credit cards with rates even higher.

I am too cheap to pay for something I could do myself, I would not pay a cleaning company or lady. Besides, I don’t want anyone having access to my personal stuff, it is human nature to nose around.
I just couldn’t justify it, but that is coming from someone, who doesn’t buy new clothes for work, “ebay freak”.

This story made me laugh. Obviously Gillian does not want to make any sacrifice. I totally understand her wanting to keep a cleaning lady (I too work hard, and don’t like to clean, and I am employing someone – 6 years – that needs a job too, this “luxury will be the last one to go in my book).

But I shop at Big Lots for household items, do my own hair color, only shop at TJ Maxx, Marshalls instead of visiting fancy and expensive stores like Macys and Nordstrom. If I eat out, I don’t drink alcohol, nor do I order dessert. Like you said, it’s about budgeting and setting your priorities. Gillian says she cannot cut cable TV because they watch television all the time? Then, if they do, they certainly don’t need two SUVs. I agree with you that certain people think someone else will hand them a solution, without having to make any effort at all. I am glad they don’t have kids, apparently they can hardly support themselves, and how could they raise a family?

Great website. I have been avidly reading your posts in the past couple of days.

This is one of the silliest things I have ever read. Reading garbage statements like this make me realize how good advertising executives must be.

SUVs are classified as trucks, and trucks have much lower federal safety requirements than cars. They also have much higher rollerover rates. If you think that SUVs are safe, I have a piece of a bridge to sell you.

Some of the responses here have been detailing how people like Gillian always seem to get “lucky” and walk away from their debt, or get an unexpected windfall to take care of it, or get help from family/friends rather than making personal sacrifices.
I agree with these statements and am sad to say that my brother fits this very picture. He has filed bankruptcy, had a house re-financed 4 times, a foreclosure, a windfall lawsuit for $75k that pulled him even, and is waiting on the time required between bankruptcy to file his second one…he is 28 years old.
About once a month, he calls me and asks for financial advice. It is a thing which increases my blood pressure…but I soundly recant the words of these pages and advice from pros like Dave Ramsey every time. He agrees whole heartedly…and within about a week, I will hear how he bought a plasma tv or a new laptop on some new card.
The point that I am trying to make here is 2 fold: 1)Some people won’t change because they “want to”, until they “have to” and run out of options; 2)At the end of the day, it’s all about wether or not you want to be a Wal-Mart greeter at age 70.
Not having retirement money scares the hell out of me, and is what changed my frivolous life of debt. I don’t want to be sacking someones Happy Meal when I am a senior citizen…and I imagine noone else does either.
Temporary help from others is just that…temporary…very few get to permananetly walk away from debt until they change their own habits…and very few senior citizens who are working for $8 an hour are doing it because they are “bored”.

This was an awesome post to share, and I also enjoyed reading the comments.

My only comment to JD would be to either work harder to get away from giving the advice in the first place or to develop an approach that focuses on the psychological factor more.

I was pulling for you when you were crunching the numbers and being “all logical” with her. However, I wasn’t reading her words to sound like she was as committed to it as he was.

As he’s surmised, the person with the money issue has to be the person with the most buy-in to developing solutions, alternatives, etc. In this example, JD spent his unpaid (and maybe even unappreciated) time volleying rebuttals.

Decisions about finances are mostly emotional, not logical. Instead of jumping into the nuts and bolts of crunching the numbers, the first part of the conversation has to work towards determining, and possibly strengthening, the buy-in from the one seeking advice. Questions that focus on why she wants to do it & what doing it will get her should come before how to do it and for how long.

28.00 utility bill? I wish! Sept through May I “average” 160.00 per month for gas alone. Late May, through august, when my 40 x 20 inground is heated (here in the northeast) to 90+ degrees I spend about 350.00/mo on gas alone. But, I’m debt-free, except for my home on which I owe about 69k worth (today) about 400k. So, I have to “suffer” and pay the bills. Oh well. I’ve struggled to be debt free after being turned on to Dave Ramsey in early 2006. We have no debt,like I said except for the mortgage, not even a gas card. We use debit cards EVERYWHERE, or our AMEX as each member of the house has one. Not the monthly payment one — the regular green card which is paid in full when the bill comes in. Now, my newest car is a 2004, bought and paid in cash in 2007, and my oldest is a 1995 which I love and I will only give it up once the pistons come through the engine hood even though I have a replacement ’02 sitting in my garage under a car cover, purchased in 2005 (again for cash)!! The 02 was supposed to replace the 95 but I didn’t have the heart to get rid of the 95 since it’s never given me a lick of trouble. Ever. Anyway, I digress. I wish I could heat/power my home for $28.00 bucks. Whoever can do that deserves a medal!
J

Geez! The Dave Ramsey clip was ridiculous! Who gets the money from insurance to fix a car AND SPENDS IT?! One of the things that keeps me going about debt repayment is that, after graduation, I’ll be able to take on more than one job and work as much as it takes to pay off my debt. I don’t care if it takes 80 hour weeks. If you really want to change your situation, you’ll work more – or give up your dang housekeeper – to make it happen.

I have a friend who is exactly like this but even worse because they are behind on all their bills and having huge fights on a regular basis becasue of it. They just refuse to make any changes to their lifestyle. They go on trips on a regular basis and the wife only works part time. I just don’t get it. I no longer offer her suggestions, I just listen.

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My name is J.D. Roth. I started Get Rich Slowly in 2006 to document my personal journey as I dug out of debt. Then I shared while I learned to save and invest. Twelve years later, I've managed to reach early retirement! I'm here to help you master your money — and your life. No scams. No gimmicks. Just smart money advice to help you get rich slowly. Read more.

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